Facebook Inc (FB) Mobile Segment To Impress Again

Facebook Inc (NASDAQ:FB) shares have surged approximately 50% since the second quarter, results reflecting a positive trend among the investors regarding the mobile segment of the largest social network. Analysts Scott Devitt, Jordan Monahan, John Egbert and Erhan Soyer-Osmanat from Morgan Stanley note that mobile revenue will add 46% to the total revenue compared to 41% in the previous year, and a meager 14% a year before that.

Also, analysts estimated mobile revenue to contribute more than desktop ad revenue in the quarter ahead.

Analyst upbeat on mobile potential for Facebook

For the third quarter, analysts expect EBITDA and revenue to be as per consensus estimates of 51% year on year, 5% quarter on quarter, and 48% year on year, with 1% quarter on quarter growth. Additionally, analysts are upbeat about the ad revenue, and estimate it to increase 55% year on year fueled by 35% impression growth.

Worldwide Monthly Active users (MAUs) are predicted to reach 1,195 million including 182 million in the United States. Further, analysts are zeroing in on the growth rate for Facebook’s mobile segment, and forecast mobile ad revenue to come in at $774 million, which would be an increase of 18% quarter on quarter. Also, mobile ad impression is expected to increase 275% year on year and 17% quarter on quarter.

In a survey, ComScore found that in the United States, there are 110 million mobile users, as of August, compared to 140 million desktop users in September. Analysts estimate mobile eCPM to surge 36% year on year as demand for mobile ad units are based on mobile share of social visits.

Items to watch for

While announcing the third quarter financial performance, management is expected to throw light on its recently revealed plan to launch ads on Instagram, video app install ads and custom audience content based on re-targeting. Analysts are also expecting to gain further insight into FBX integrating with a double click, and on the anticipated launch date for Facebook Inc (NASDAQ:FB)’s video brand, expectations of which are focused on the fourth quarter of 2013 or first quarter of 2014. Video ads are expected to contribute around 10% of ad revenue in 2014.

Morgan Stanley analysts have an Overweight rating on Facebook with a price target of $49.